Though many companies maintain a largely remote workforce for the time being, others are starting to return to the office.
“A lot of companies have been waiting for direction from state officials about when to reopen or return to the office, and this new announcement from the governor acts as a green light of sorts,” said Paul King, managing director of property management at CBRE Group.
In a typical year, office owners and management firms are concerned with renovations, maintenance and leasing efforts.
Those responsibilities looked a lot different in the past year, as property managers looked to respond to tenants’ coronavirus concerns, from rent forgiveness programs to sanitation-focused design changes.
The county is closer than it has ever been to returning to normalcy, and managers are noticing the effect.
“Leasing has picked up, and tenant sentiment on returning to the office has improved substantially in the past six to eight weeks,” said Parke Miller, executive vice president of area landlord Lincoln Property Co.
Gains
Property managers grew their local portfolios despite the year of uncertainty; the Business Journal Property Manager’s ranking is now in its ninth consecutive year of industry gains.
OC offices saw portfolio increases both inside and outside of the county, with the area’s 20 largest property managers increasing their local office, industrial and retail space by 6% to 177 million square feet.
Including properties outside of OC, local offices managed 386.5 million square feet across 3,161 properties, up 6% and 3%, respectively.
This boost can be in part attributed to a continuation of commercial development, as construction was deemed an essential business early on in the pandemic.
Irvine Co. in Newport Beach boosted its local portfolio by nearly 500,000 square feet last year, most notably delivering the second 350,000-square-foot phase of its Spectrum Terrace office project, which recently secured another full-building tenant (
This helped move Irvine Co. up to the No. 1 spot, swapping places with the Newport Beach office of CBRE.
Tenant Demands
Just as some commercial product types fared better in the wake of the pandemic, the same can be said for Orange County’s pool of office properties, as tenants rethink their space needs.
New creative office projects, specifically low- to mid-rise properties, are emerging as a winner as tenants relocate within the county.
In addition to Spectrum Terrace, Tustin’s Flight office project is another example of a newer creative office project that’s captured tenant interest.
“High-rise office projects were going out of vogue before the pandemic, and that’s only accelerated in the past year,” said Miller, adding there is nearly 50,000 square feet of leasing deals in the works at Flight.
This includes the project’s newest tenant: Stark, a local holistic health and wellness company that will manage Flight’s 7,000-square-foot fitness center.
Lincoln Property increased its area portfolio by 15% to 7.1 million square feet, driven by an increase in the firm’s industrial business, including two buys in Anaheim in the past year.
In one of the deals, Lincoln bought a site just off Anaheim Boulevard in Anaheim, and will develop a ground up 100,000-square-foot industrial development there. Construction is slated to begin this July.
“Industrial has been the main driver of the commercial real estate market, and that’s not slowing down,” Miller said.
Flexible Approach
As tenants return, CBRE’s King expects employers to take a more flexible approach regarding time in and out of the office.
“The companies we are working with are looking to slowly return employees to the office for a few days a week through the end of the year, and then ramp up after that,” King said.
A longer-lasting impact from the pandemic on office properties is a continued focus on sanitation and social distancing efforts.
“We’ve made significant investments in better air filtration, sanitizing stations and tech-focused touchless features across our portfolio, and those changes are here to stay,” King said.
CBRE’s local portfolio stand at about 14.9 million square feet.
